Impact of Pak-IMF Bailout Arrangement On Economic Growth

Journal of Public Policy Practitioners (JPPP)
Volume 1 Issue 1, Spring 2022

ISSN (P ): 2959-2194 , ISSN (E) : 2959-2208
Homepage: https://journals.umt.edu.pk/index.php/jppp
Article QR
Title: Impact Of Pak-IMF Bailout Arrangement on Economic Growth

Author (s): Zahida Sarfraz
Affiliation (s): Inland Revenue Services
DOI: https://doi.org/10.32350/jppp.11.05
History: Received: March 24, 2022, Revised: May 24, 2022, Accepted: June 20, 2022, Published:
June 30, 2022
Citation: Sarfraz, Z. (2022). Impact of Pak-IM F bailout arrangement on economic growth.

Journal of Public Policy Practitioners, 1(1), 165–
200. https://doi.org/10.32350/jppp.11.05
Copyright: © The Authors
Licensing: This article is open access and is distributed under the terms
of Creative Commons Attribution 4.0 International License
Conflict of
Interest: Author(s) declared no conflict of interest
A publication of
School of Governance and Society
University of Management and Technology, Lahore, Pakistan
Impact of Pak-IMF Bailout Arrangement on Economic Growth
Zahida Sarfraz *
Inland Revenue Services
Abstract
Government of Pakistan has been facing various macro-economic
challenges due to internal and external factors. Pak economy suffers from
monetary, fiscal and BOP crisis after every few years building up a near
crisis scenario which needs to be managed through traditional stabilization
policies most common among them is approaching to IMF. Pakistan’s
policy of dependence on internal and external loans is not new and the cost
of these crisis management plans has a strong reason behind slowing down
socio-economic development. The recent economic crisis has approached
after facing a significantly harsh macroeconomic imbalance during 2000-
2016 while Pakistan was under an IMF Program. To bridge up the gaps in
import- export, making up declining foreign reserves, satisfying FATF and
support the BOP imbalance, Government was left with no alternative except
to have a bailout package with IMF embracing all the attached harsh
conditions. During the recent past Pakistan failed to enhance its portfolio,
put a gauge on unnecessary and luxury exports at higher rates, a weak tax
system where tax evasions increases fiscal deficit, lavish exemption and
reductions in tax rates rising inflations, expanding unemployment and a
weaker industrial base make Pakistan stand on the verge of serious dip. All
this has a trickle down impact to the poor masses due to weaker economic
policies and deepening corruption in Pakistan. These are the ideal
ecological factors which held the IMF plant grow greener and healthier. The
present bailout program has a list of policies to correct domestic and
external factors and strengthen the economy of Pakistan as it has been doing
in many other countered. This paper is an attempt to cover the impacts of
previous program and of the recent one on the economy of Pakistan.
Keywords: IMF, bailout, FATF
Introduction
Pakistan’s economy is placed on a fragile pedestal. It has a precedent of
imbalanced economic policies which are flagged with fiscal deficits, weak
*
Corresponding Author: zahidasarfraz@gmail.com
Journal of Public Policy Practitioners
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monetary policies, overvalued exchange rates, expedited consumptions and

very short recent span of growth but all topped with an increasing internal
and external debts and decreasing national reserves. During the past many
years ruling elites remained unsuccessful in redressing structural
weaknesses, poorly administered tax system, harsh environment for
business setups and loss generating SOEs in the courtyard of informal
economy’s villa. In the absence of actionable policies, economic stability is
always at a risk increasing the scale of insufficient economic growth for an
enormous population. After observing failure to cope with fiscal and
monetary matters the favorite resort of Govt. of Pakistan is to obtain loans
to keep the debt cycle revolve smoothly and to meet the challenge of balance
of payments and other financial obligations.
Pakistan has recently asked the help of IMF some 18th time since 1958
while it is a member of IMF since1950. Pak-IMF long negotiations finally
ended up with the herald of IMF’s assent to accord for a bailout package of
06 Billion USD to be credited to Pakistan in 39 installments. In July 2019,
Pakistan signed the deal to manage its external economic challenges
(Lipton, 2019a). By now first installment has been received by the borrower
country. This is a recurring phenomenon for last several decades. The
vicious cycle seems to be truly entrenched in the political/economic culture
of Pakistan. The objective of this bailout support is to get some relief to
combat the financial hardships faced by new Government. IMF’s programs
are known for two reasons,
• The macro-economic adjustments and
• The structural transformation of the economy.
Every successive Government claims to break the proverbial “Begging
Bowl” but yet again Pakistan finds itself at the doorstep of international
lenders asking for help in distress (Samaa, 2016). This time too, there is a
claim and hope that Pakistan can be on the road of sustainable economic
development once the objective of program is achieved. However, this
remains to be observed in the coming months of the current financial year
and in the forthcoming years of indebtedness.
Statement of the Problem
The rising figures of internal and external debts and shortage of funds
to pay back installments to the international money lenders Pakistan has

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Impact of Pak-IMF Bailout Arrangement...
chosen to avail IMF’s bailout yet again; the 13th time. However, IMF
programs are known to impose harsh conditions for improving the
macroeconomic indicators of a country. How IMF’s conditions will affect
relative economic growth in Pakistan is an issue of academic as well as
pragmatic interest- which needs to be explored in detail. This paper is an
attempt to find
• Whether the bailout program is beneficial for the sinking economy of
Pakistan?
• What is the overall impact of this bailout program on the economic
growth of Pakistan in the presence of high internal and external
liabilities?
Significance of the Research Paper
The research paper will be of immense importance to policy makers,
economists and the academic community for two different aspects first for
divulging the issue of benefits and disadvantages of availing the bailout
program and secondly to look for availability of other avenues to mobilize
the revenue resources for achieving sustainable economic growth and
freeing from the clutches of debt.
Scope of the Research Paper
Scope of this research paper is confined to the analysis of impacts of
bailout program on the economic growth of Pakistan, reasons for
approaching to IMF for obtaining another EFF and the study of the
conditions attached with bailout program creating an environment difficult
for economic growth in Pakistan. Due to certain time constraints for this
research the scope is limited to the analysis of need for bailout, its
importance to fill the gap of balance of payments, structural adjustments
and impact on the economic growth in both long and short term.
Furthermore, only macroeconomic variables which contribute towards
growth in Pakistan have been discussed. Political instability, present
inconsistent policies and other allied social issues that may contribute to
effect economic growth are not a part of this research study.
Review of the Literature
Dr. Irshad explored that the future of Pakistan is promising but depends
upon a number of factors (Irshad). If Pakistan adopts strong macroeconomic
policies, introduces structural reforms, invests in infrastructure and human
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developments it can rejuvenate economy. He emphasized introduction of

favorable conditions for investment to take up growth rate 2-2.5% annually
and enhance per capita income up to US$2600 by 2030.He explained that
Pakistan needs to review its macroeconomic policies to achieve sustainable
growth trend instead of entering into new programs with IMF.
Ahmed explored the effects of IMF bailout on Industrial sector
performance in Pakistan (Arab News, 2019). The author used the data of
373 industries (2238 observations) for the period of 2009-14 with four
dependent variables; return on equity, return on sales, return on assets and
earning per share with and without bailout package as independent variables
to check out the performance of manufacturing sector. Regression analysis
and Hausman test were employed by author to evaluate the results. The
outcomes of the study suggest that all the dependent variables were
significantly and negatively associated with bailout packages.
Azam investigated the casual association between GDP and financial
crises factors such as inflation, bulk of financial debt and interest rate in
Pakistan (Azam & Lukman, 2010). The study employed the Johansson’s
integration test on time series data for the period of 1972-2010 to assess the
long run stability among the variables. Unit root test also used to study and
check the reasons for stationary variables. Findings of the study confirmed
that the existence of long run stability equilibrium between economic
growth and said variables. The study concluded that GDP and inflation had
no co-integration themselves while Interest rate and foreign debt had co-
integrated with GDP. Furthermore, interest rate is a factor which decreases
the stock payoff and raises the debt cost. The study recommended that
central bank must adopt balance monetary policy and government should
provide feasible environment for investors.
Malik assessed the correlation between economic growth and foreign
debt in Pakistan by using the time series data of 1972-2005 (Malik et al.,
2010). The data collected from world development indicators, economic
survey of Pakistan and international financial statistics. The study
employed ordinary least square method to analyze the impact of foreign
debt and debt servicing on economic growth of Pakistan. Augmented Dicky
Fuller (ADF) test was used to study stationary variables. The outcomes of
the study revealed that both the foreign debt and debt servicing had negative
but significant association with economic growth. As the foreign debt and
debt serving increased it decreased the economic growth. The study was
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concluded that poor economic policies, political instability and

mismanagement of foreign debt resulted decline in economic growth. Due
to strict conditions of IMF loans the balance of payment account
deteriorated. Government should increase export base, remake confidence
of local and foreign investors and make adequate economic policies
recommended by the study.
Khan describes the impacts of structural adjustment program as increase
in indirect tax base, reduction in budget deficit, revised exchange rates,
reduction in subsidies, lowered inflation rate, employment, per capita
income, and income distribution (Khan et al., 2011). They used four
different models and applied ordinary least square technique on the time
series data ranging 1981-2001. They found that lower budget deficit
positively impacts employment level, income distribution and negatively
impacts inflation rate while increased indirect taxes have negative effects
on employment level, income distribution, per capita income increase
inflation. Furthermore, reduction in subsidies and revise exchange rate has
negative effects on employment level, inflation, income distribution and per
capita income. They also conclude that structural adjustment program was
unfavorable for country’s macroeconomic variables during adjustment
duration. They recommended that government should not adopt such
adjustment programs.
Methodology
The method applied in this research Paper is basically qualitative in nature
and secondary data has been utilized. Various reports, articles and research
papers on IMF bailout arrangements published in domestic and
international newspapers and journals by Government and private
organizations, annual report of the State Bank of Pakistan and Economic
Survey of Pakistan have been consulted. Besides, various articles of the
leading newspapers have been perused to analyze the impact of IMF
program.
Specifically, the precise method which would be employed in this
research would entail the methods of qualitative content analysis. This type
of methodology would entail the use of sources mentioned in the literature
review to analyze the patterns of which are useful to address that Whether
the IMF programs are beneficial to the economy of the Pakistan in terms of
their possibility to help the economic prosperity of Pakistan. This would

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Sarfraz
require reference to the a number sources to highlight a pattern while

focusing on their precise frequencies through the perusal of the relevant
datasets. The questions which this qualitative analysis would seek to answer
would be specific in nature as the same would be reflected through the
course of this paper which would at require summaries and tables of various
time phases to answer these questions in the light of the variables.
The methodology of this research also reflects a comparative approach
as well which is required to precisely note the salient features of other
economies which have been engaged in the past by the IMF such as
Argentina and Egypt to demonstrate the effects of the programs in
developed and developing countries. Amongst the developing countries,
Egypt is chosen because of their suffering economy due to previous crises
and the same is an agricultural economy as Pakistan is, therefore an analysis
of Egypt would be capable elucidate the patterns which are witnessed in
Pakistani economy as well. On the other hand Argentina is chosen because
the same had been engaged into IMF upon a notable number of times as the
country is rich in natural resources and their economy had suffered which
required these bail out packages from IMF.
Organization of the Paper
This paper is divided into three parts. First part of the paper studies the
interaction between Pakistan and the IMF over the course of time and why
the Government had to go to the IMF despite initial reluctance. Also, what
has been broadly agreed with the IMF in the current deal?
second part identifies and explains the structural economic weaknesses
of Pakistan that are the root causes of our frequent visits to the IMF and
experience of some other countries with IMF and the final part shall be
dealing with the Impacts of current IMF program on economic development
of Pakistan. As the deal has been concluded by now and first installment of
$01 Billion is received hence its impact on the overall growth of economy
of Pakistan is to be analyzed. This part is exclusively focused on pointing
policy prescriptions (derived from the study) that should be followed if
Pakistan has to get off the addiction of IMF and proceed on the path of
sustainable economic development.

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IMF and its Functions

Explaining IMF
IMF since its inception served as a forum of cooperation and
consultancy hence contributed significantly towards streamlining
international monetary relationships and expansion of global trade. IMF
also provided assistance to countries facing hardships in BOP. The three
major functions of IMF are below.
1) Policy Assessment and advice (Article IV Consultations)
2) Lending (Facilities to support programs of Governments approaching
for financial/ monetary help of IMF
3) Capacity building (Technical assistance and trainings for devising
effective monetary policies)
IMF also provides many other financial facilities as under;
1) Concessional Rates
a) PRGF (Poverty Reduction and Growth Facility)
b) ECF (Extended Credit Facility)
2) Market Based Rates
a) SBA (Standby Arrangements)
b) EFF (Extended Fund Facility)
Functions, Powers and Jurisdictions
There are many voluntary services and informational functions in IMF’s
official tasks;
Regulatory Functions
With reference to Articles (VIII) of Agreement, regulatory function of
IMF deals with the Jurisdiction on limiting outflows and transfers for
current international transactions. The member nations of IMF are bound to
deliver their all essential statistical data or information.
Consultative Functions
This function of IMF includes not only the monitoring and evaluation
of world monetary system but also criticism and giving observation over the

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policies of member nations. All these exercises contain systematic

checkouts by other member nations under Articles IV of Agreement.
Financial Functions
It is the basic function of IMF. In the light of Articles V, VI of
Agreement, IMF provides loans to member nations for correction of
temporary issues relating to balance of payment account and provides long-
term loans through SDR system (International Monetary Fund [IMF],
2016).
Service and Supplementary Informational Functions
As compared to above mention obligatory functions, service and
supplementary informational function of IMF is voluntary in nature. This
voluntary function consists of broad spectrum technical assistance,
statistical and non-statistical programs.
Role of IMF as Donor Agency and as a Financial Advisor
International Monetary Fund (IMF) acts as donor agency and financial
advisor to member countries.
IMF as Financial Advisor
IMF provides financial assistance and advice to its members. IMF is
liable for carrying out and maintaining the monetary system of the world. It
provides a favorable environment and systematic tools for international
transactions encouraging investment and sustainable world economic
growth. For attaining its goals, IMF advises macroeconomic policies, these
policies have stronger influence on members’ federal budget, exchange rate
determination and money supply. IMF also judges the structural policies
that relate to labor market and employment as well as streamlining financial
sector (Heakal, 2019). IMF regulates a surveillance process to advise the
members about implementation of thorough and suitable economic policies.
It also assesses whether domestic policies promote countries’ own stability
by examining risks to BOP stability.
Why Pakistan Needs IMF
Like the previous governments, the new Government of Pakistan (2018-
2022) also preferred to approach IMF as it faced economic challenges due
to weak fiscal and monetary policies of previous Governments discussed as
under:
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Structural Economic Challenges of Pakistan

Pakistan has to approach the IMF quite often because economy is unable
to sustain independently. There are structural issues in the economy that
need further loans, external aids or bailout packages. Recently, the current
account deficit rose to extreme high levels causing need of external support
to the economy (kundi, 2019a). In case of Pakistan, Trade deficit is the
biggest contributor to current account deficit.
Following structural economic issues are the root cause of Pakistan’s
macroeconomic instability.
Poor Tax Collection
Pakistan is a highly populated country with an informal economy. Only
1% of the population is taxpayer out of which 90% taxes are collected
through withholding taxes (Federal Board of Revenue [FBR], n.d.). More
than I million returns are filed without paying even a single penny into Govt.
Treasury. The sore of undocumented economy has over the years badly
marred the tax to GDP ratio. The tax to GDP is 7% which places Pakistan
on comparatively lower pedestal among emerging economies. In 2018-19,
Pakistan Tax to GDP ratio has declined to 11.6% from 13% in 2017-18
(Dunya News, 2019). This has caused unprecedented pressure on the
economy because tax collection does not facilitate Governments to run day
to day business, pay off debts and focus on development programs.
High Fiscal Deficit
Pakistan has a persistent budget deficit problem due to low tax
collection and higher debt servicing. One reason of high fiscal deficit is the
burden of salaries & pensions on federal budget (Kundi, 2019b). For the
year 2018-19, it has reached at the level of 8.9% of GDP- highest ever in
last eight years (Mustafa & Haider, 2019). This kind of fiscal deficit needs
immediate attention to maintain monetary functions.
Insufficient Exports of Pakistan
Exports are hovering around $25 Billion USD for the last few years.
More than 80% of exports are related to textiles &apparel, leather &leather
articles, sports & surgical goods and a very limited food segment. Many
exports articles are not better in quality and lack international technological
standards (Monnoo, 2019). The reason behind dip in exports is due to lack
of entrepreneurship of Government and harsh environment for business
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sector in Pakistan. To maximize exports, Pakistan needs to venture into high

tech exports and be a part of global value chains (Zaidi, 2018). Since the
trade deficit is above USD 30 Billion for last two years, it is empirical to
have significant rise in exports.
Inelastic Imports
Imports have been in the range of 50 to 60 Billion USD for the last three
years. To control trade deficit, one potential option is to compress imports.
Most imports are inelastic in nature and comprise of Oil & Gas, Food group
and Machinery (Zeb, 2019). High demand of imported food and
unnecessary items need to be checked to fix the dollar with necessary
regulations.
Low National Savings
Due to uneven distribution of resources, low per capita income,
national saving rate in Pakistan is much lower than many other emerging
economies of the world. It has attained a percentage of 10.7 for the fiscal
year 2018-19. Since savings are identical to investments, lower savings
means lower inland investments resulting in lower GDP rate. To gear up
economic growth, Government has to borrow from outside (Mattis Global,
2018). However borrowing also couldn’t solve monetary issues and the
snowball of debts kept rolling on resulting in knocking at the doors of the
last resort of IMF.
Inefficient Public Sector Enterprises (PSEs)
Public sector enterprises in Pakistan are inefficient and loss making.
Over the years, numerous efforts have been made by successive
Governments to turn these profitable but the results remained
unsatisfactory. From power sector to aviation, PSEs are running into losses
and putting pressure on Government finances (Iqbal , 2019). Pakistan ranks
117 in the list of 157 countries in ease to do business hence failure of
PSE/SEZ’s are another shadow on the efforts to achieve sustainable
economic growth.
Low Foreign Direct Investment
Due to host of reasons, like political instability, insecurity, governance
issues, foreign investors are reluctant to invest in Pakistan. FDI is range
bound between USD 1-4 Billion during last ten years (Pakistan Foreign
Direct Investment, n.d.). This could be major source of earning dollars to
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manage Current Account Deficit but this sector is ignored. Slower

institutional response inhibits foreign investors.
Remittances a less Focused Sector
Pakistan gets a significant amount of dollars (USD 20 Billion for 2018-
19) from overseas Pakistanis as remittance. Dollars arrival is vital to
manage external deficit of Pakistan. Pakistan has a large manpower which
can be trained and sent abroad but lack of Government interest in training
manpower to attract remittances has spoiled this source as well. However,
there has to be a clear focus on country specific plan, target countries should
be those which have a stagnant or declining population so that a well-trained
workforce is required there, Japan is the prime example (Harding, 2019).
Experience of Developing Countries
Egypt
Placed in northeastern part of continent Africa Egypt is one of the most
versatile economy of Middle East. Egyptian economy mainly depends on
services and Agriculture sector. According to 2018 estimate (Central
Agency for Public Mobilization and Statistics), Egypt has a labour force of
28.8 million persons.
The recession of 2008 slowed down the economic activity and increased
the macroeconomic instability. To restore the same, Egyptian authorities
signed an agreement with IMF of $12 billion under Extended Fund Facility
(EFF) in 2016. Before entering in IMF program, Egypt’s annual GDP
growth rate was 4.3 percent in 2015 which was highest after 2008’s
recession. Budget deficit stood at -11.5 percent of GDP and current account
balance reached to -5.1 percent of GDP. External debt of Egypt remained at
15 percent of GDP in 2015.
Table 1
Economy of Egypt under IMF

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IMF stabilization policies disturbed economic growth, inflation and

unemployment rates reached to double digits. The annual GDP growth
remained 4.2&4.1 in 2016 and 2017 respectively. Investment further
decreased and budget deficit reached to -12.5%of GDP in 2016. Higher
imports and depreciation of Egyptian pound current account balance
decreased to -6.1 percent of GDP. As a result of IMF bailout package, 175%
increase in external debt observed in 2017 (Rafique & Tarrar, 2019).
The ninth IMF financial assistance program ended on November 10,
2019. IMF and Egyptian authorities declared it successful. GDP attained at
5.6 percent, budget deficit and current account balance reduced to -8.6%
and -2.2% respectively, in 2019&2108. But the poverty and inflation kept
mounting during bailout program. Like previous IMF programs, it also
addressed short term difficulties of Egyptian economy.
Experience of Developed Countries
Argentina
Argentia is the second largest and developed country of South America
having plenty of natural resources, export oriented agriculture sector and
developed industial sector. Argentina spent 38 years under IMF programs.
1998-2002 economic depression had drastic reduction in overall economic
activity of Argentina (Phillips, 2018). Argentina approcehed IMF 6 times
in the last 02 decades. Before IMF program, Argentina faced negative GDP
growth of -10.8%, -2% budget deficit, surplus current account balance 8.9%
and highest external debt 117.8% of GDP in 2002. Decline in foreign
investement and capital inflow decleared it a defaulter. Inflation and
unemployment rates touched 20% in 2002 (Phillips, 2018).
Table 2
Economy of Argentina under IMF

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During IMF financial support Argentina overcame macroeconomic

instability. The GDP growth reached 9% in 2004. But the devaluation of
Argentina Peso had adverse impact on current account balance. Its devalued
Argentina’s export and increased imports rate. Expansionary policies
improved fiscal side and budget surplus noted at 3.7% of GDP in 2nd year
of IMF program. After restrictions the total external debt narrowed to
92.7%, 90%, 64.9% and 52.2% of GDP in 2003, 2004, 2005 and 2006,
respectively (Argentina Government Budget, n.d.). GDP growth reached
9% annually. Budget surplus decreased to 1.1% of GDP in 2007 the highest
during IMF program (Macro Economy Meter, n.d.).
Pak-IMF Bailout Arrangements: A Failure or Success Story
A Historical Overview of Pakistan’s Experience with IMF
As already discussed, the last decade (2008-2018) has been very
important for Pakistan in regard with Pak-IMF relationship. Several
programs have been implemented in Pakistan, on the advice cum dictation
for evolving economic stability, management of austerity and demand in the
last 10 years. The long existing weakness of demand has kept economic
growth under threat causing harm to production capacities of firms and
pushing workers leave jobs. A detailed table portraying Pak-IMF deals
(IMF, 2016) for economic stability is as under in Table 3.
The entire scenario not only eroded skilled job demand but also
increased unemployment. After 10 years of implementation of stabilization
policy masses witness slow economic growth, worsened unemployment,
deteriorated current and fiscal account deficits, increasing domestic and
external debts and rapidly depleting reserves of foreign exchange. As
Pakistan has faced the challenge of prolonged span of low interest rate and
failure in boosting demand and economic growth hence the case is ideal for
supporting public investments, structural reforms and minimizing the cost
to do business that is a fit prescription for treatment of economic growth.
Economic Growth is a comprehensive benefit for masses.
Unfortunately, IMF itself is an impediment in achieving the objectives of
its own policies. The studies have revealed that macroeconomic policies
prescribed by IMF itself have adversely affected medium to long-term
growth plans. Discussion on what experience Pakistan has learnt in
implementing Stabilization Policy on the directions of IMF over the last ten
years is as under.
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Table 3
A Historical Overview of Pakistan’s Experience with IMF
Source:https://www.imf.org/external/np/fin/tad/extarr2.aspx?memberKey
1=760&date1key=2016-06-30
Growth and Employment
Pakistan has adopted Stabilization Policy during the last 10 years (2008-
18). Unfortunately, said policies somehow have proved to be adverse to
growth and economy of Pakistan. This ten years span of harsh policies
caused damage to medium and short term prospects of growth. Economic
growth in Pakistan has been 3.8% during the decade under discussion and

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6.3% in the last 04 years when there was no IMF program. This comparison
requires no further comments.
Table 4
Growth and Employment (Percent)
During the last 10 years after implementing stabilization policies

directed by IMF, agricultural, manufacturing and services faced gradual
decline resulting in deficient demand further leading towards deficient
supply of an average growth of 3% in manufacturing sector (Kazmi, 2019).
How an investor or a producer could invest more in deficient demand
phase? The extended era of slump during 2008-18 damaged the productive
capacity of Pakistan’s economy and halted the growth. Even now, the new
growth is expected to be in the range of 3.5% to 4.5% only.
The weak economic policies have caused a lasting poverty among the
poor of society. The next threat is unemployment as the consistent trend of
low economic growth during last decade has failed to create market jobs,
increasing the size of unemployment. The unemployment of youth has
increased over 10% during the financial year 2017-18. The figure is further
expected to rise if labor market remains the same as a result of
implementation of stabilization policy directed by IMF. The impact of IMF
program has subdued growth and creation of jobs for youth and new
graduates of professional institutes.

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Table 5
Key Labour Force Statistics (Percent)
Fiscal Side
Reduction of fiscal deficit requires strict fiscal policies drafted under
IMF lending program. Achievement of macroeconomic stability is
impossible in the absence of sustainable poverty alleviation and economic
growth. The decade of 2008-18 remained under surveillance of IMF but
fiscal deficit could not be reduced despite best efforts as poor policies
prevailed over.
Pakistan sustained a huge budget deficit of 7% of GDP during financial
years 2008-09 to 2012-13. Mere manipulation of figures kept on taking
place from FY 2013-14 to 2016-17 by holding due refunds of tax payers,
making commercial parties pay more taxes as advance tax to make up
figures, recording foreign grants and proceeds from the process of
privatization as non-tax revenue to inflate revenue position instead of
treating as financing items and dealing in quasi fiscal activities out of budget
leading to large discrepancies approximately Rs.600 billion in three years.
The setup was designed by declaring low expenditures, inflated cash
balance surplus available with provinces, retention of revenue in federal
consolidated fund and building up of contingent liabilities (the circular debt

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of power sector was over 1400 billion, ending tax refunds and pending
income tax and sales tax refunds and commodity financing debt got
accumulated to over 800 billion). The adjustment practice caused a fiscal
deficit of 7-8% of GDP annually. It has safely been observed by the
economists that policy to reduce fiscal deficit miserably failed in last
decade. It is pertinent to discuss that IMF, during last program (2013-16)
extended almost 15 waivers and perhaps IMF has not extended such large
number of waivers to any other country in its history.
Public and External Debt
Pakistan has faced the worst fiscal indiscipline during last decade under
IMF. Pakistan maintained its fiscal deficit of 7% of GDP throughout and
continued to doll out financial resources of Rs.15-Billion. Situation raises
certain questions on the evaluation system of IMF regarding conditionalities
which are an integral part of program as extensions and relaxations are
released after strict evaluation. The situation transpires that attention was
intentionally kept away and Pakistan was let to drown under debt by pouring
in more and more dollars while internal/ external debts were touching new
heights.
The internal/public debt under IMF regime reached to 90% per annum
during the FY 2008-09 to 2012-13 under strict surveillance. During 2013-
14 to 2017-18 public debt increased at average rate of 12.3% per annum.
The reason of slow growth of public debt was fixed exchange rate policy
implemented by government of Pakistan. For entire decade, public debt kept
increasing at average rate of 15.6% per annum. The fiscal situation of
Pakistan remained fragile throughout and so called efficacious role of IMF
program remained questionable. Another example is quoted from 1990’s
known as (“lost decade” for Pakistan by eminent economists) table below
depicts the additions under the head debt and liabilities during “two lost
decades” (i) 1990’s and 2008-18.
It’s a fact that Pakistan added up its liabilities and external debt to 66.5
billion dollars in two decades. It could safely be deduced that 70% of
liabilities and external debt is a gift of “lost decades”. The similarity of these
decades is reward of IMF program which implemented stabilization policy
by imposing severe instability in Pakistan. Keeping in view economic
environment how can one expect a different result this time? Are we ready
to lose another decade in the hands of IMF by putting aside the opportunities

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available in the attic of unusable resources. These facts are well-

documented in Table 4.
Table 6
Trends in Public and External Debt (2007-2018)
Table 7
Trends in Public and External Debt (1990-2018)
Source: State Bank of Pakistan; and Dept Policy and Coordination Office,
Ministry of Finance.
An analysis of Previous Pak-IMF Bailout Arrangements
Need for Bailout Programs
The countries which face financial collapse/troubles, inability to pay
debt installment, approach IMF for bailout programs. Currently IMF
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provided loans of $200 billion to Ukraine, Argentina, Egypt etc. Pakistan is

facing these issues for the last 72 years. In last ten years, Pakistan
approached IMF three times 2008, 2013 and 2019 to seek support for
shaking economy. Every successive government receives huge burden of
deficits in inheritance including trade/budget deficit, circular debt, high
inflation and unemployment rates, deficits of public enterprises and burden
of debt/debt servicing. All is due to insufficient institutional reforms and
engraving corruption.
Conditions of previous Bailout Programs
While issuing loans to member countries IMF limits or puts conditions that
countries in the form of “institution reforms, tight fiscal and monetary
policies” shall act to achieve their objectives.
a) 11th Pak-IMF Bailout Arrangement. In 2008 IMF approved three year
standby arrangement of $7.6 billion with some conditions.
• IMF said to Pakistan government to reduce their budget deficit 7.4 % to
3.3 % in 2009-10.
• Reduce subsidy on energy and decline their expenditures and State Bank
of Pakistan implement contraction monetary policy by increasing bank
rate and limited money supply.
• Increase foreign reserves and decline in inflation rate up to six percent
in 2010.
• Central bank should stop government financing and government should
avoid supporting stock market by using public resources.
• Increase expenditure on “social safety” by 0.6 percent to 0.9 percent of
gross domestic product to reduce poverty.
b) 12th Pak-IMF Bailout Arrangement. After general elections of 2013,
the newly government approached to IMF for 12th “bailout program” to
support economy and huge burden of $4 billion debt services. Pakistan
signed $6.64 billion loan arrangements under EFF.
• It is necessary for Pakistan to decrease budget deficit 8.8% to 6.3% of
GDP.
• Reduce rates of subsidies on electricity for domestic user and
rationalized gas prices.
• Pakistan government must devalue its domestic currency up to 110
rupees on term of US dollar.
• Privatization of 30 state owned loss making enterprises out of 35.

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• IMF also emphasizes increase in tax base. Pakistan government should

increase its tax base from 9.7 percent to 15 percent of GDP by 2019
(IMF board approves, 2019)
Salient Features of 13th Pak-IMF Bailout Arrangement
It is well understood that IMF programs are known for the ancillary
harsh conditionalities, this program is nothing but a sugarcoated analgesic
for temporary treatment but not a permanent cure. The 13th Bail out carries
certain conditions discussed under:
According to economists FY 2017-18 has been recorded as the most
difficult in the economic history of Pakistan. Within a span of one year three
finance ministers managed the drowning economy (i) Mr. Ishaq Dar (ii)
Miftah Ismael and (iii) Dr. Shamshad Akhtar but economy couldn’t get
stable. Fiscal deficits remained on rise translating into increasing imports
resulting in current account deficit of USD 19 billion (6% of GDP in 2017-
18). The overall budget deficit revolved around 6.6% of GDP but his
number was an understated figure for a plethora of reasons.
The new government was presented a fragile economy so was somehow
tilted towards approaching IMF to support BOP. The members of the EAC
(Economic Advisory Council) were also inclined to approach IMF.
However, there were only a few economists who strongly agitated IMF
program. Since 2000 onwards, three IMF programs have fully been
exhausted. With a comparatively higher rate of completion of programs
since 2000 and after two years of successful completion of the latest
program in September 2016, the economists lift a brow that why
government feels being left with no other option except to seek assistance
of IMF again? If the economy of Pakistan sustains a fiscal deficit relapse
then the authenticity of an economic health certificate issued by the IMF to
Pakistan is doubtful as the prolonged era of loans and bailouts to manage
economic dip forecasts the inefficacy of programs dictated by IMF.
Secondly, the alarming strategic environment will pursue IMF to go by
the book. This time IMF cannot be taken as benign as it was during 2013-
16 when 15-waivers were accorded within a short span of 3-years. May be
the hidden politics played role and IMF’s policy got compromised by
Pakistan’s relationship with USA, the dominating shareholder of IMF
(Mustafa & Haider, 2019). The third situation is that this time Pakistan is
not at liberty to have another four years of low growth like during financial
185
year 2008-18 with a growth of 3.8%. Approaching IMF and seeking for
stabilization policy will keep the growth rate within 3.5-4% of economic
growth causing impediments for employment sector.
At the moment, Pakistan requires a growth full of jobs that is impossible
to achieve in the presence of granted stabilization policy of IMF that can
lead to aggressive compression of imports and may include banning imports
of goods categorized as non-essential for a year twice with an intention to
reduce current account deficit. The export sector of Pakistan needs to be
reviewed seriously by harmonizing the sector with trade friendly tax
policies, adjusting input prices with competitors like Bangladesh to support
exports, issuing refunds to exporters by improving liquidity of capital,
alignment of exchange rate, to make exports alive and growing factor in
Pakistan’s economy (Iqbal, 2019).
The flow of foreign remittance is empirical but it faced unexpected debt
in the first quarter of FY 2019-20, however, the government can instead
float Euro Bonds, Islamic Bonds, Chinese Bonds, Non-Resident Pakistani
Bonds, Exchangeable Bonds, etc. to mobilize the foreign exchange to boost
reserves (Khan, 2019). It has been observed that Pakistan needs to pursue a
futuristic macroeconomic policy which if not addressed appropriately can
lead to further deficit. Further it needs a balance between stabilization
policies and developmental policies while devising new macroeconomic
policies instead of following 1980’s stabilization policies which are no more
efficacious medicines for the chronic patient.
The consistent low economic growth has led the country in deficient
demand and supply situation. Nobody is ready to invest in a market of
deficient demand and deficient supply. If status quo persists, the country’s
productive capacity shall further damage the growth prospective. Pakistan
needs structural reforms and reduction in cost of doing business including
trade cost as a policy prescription to boost demand side to optimize
economic growth.
As an alternative, Pakistan should adopt domestic policy of minimizing
imports for at least three years, promoting foreign remittances, boosting
exports, issuance of bonds and creating atmosphere for FDI with wide
structural reforms. Pakistan needs to change spending priorities. As a result
initially public debts and deficits may increase but will get adjusted in the
long run. On the other side, where there lies huge expenditures, budget

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allocation be made for building of human capital for higher education,

health, social security, development of skills and to improve the physical
infrastructure of the country like communication sector, energy sector,
development of ports and highways.
Expenditure on social sector development will not only increase the
production of services but the same will also give rise to job opportunities
making up an environment for investment in Pakistan. Expenditure on
building of human capital not only improves productivity level but also
economic growth. It is the physical infrastructure that promotes growth and
employment sector for alleviation of poverty instead of supporting
programs like BISP. As per the debt theory, the debt circle is not always
negative, obtaining of loans/debts keep on rotating the economic growth
within a country, making up the development sector and public funded
programs. It is empirical to have more emphasis on the nature and taxonomy
of expenditure then merely focusing on the budget deficits and public debts.
The macroeconomic policy of Pakistan needs to focus more on the
development goals, extra priority of expenditure and minimize the current
account deficit. It is an unfortunate story of Pakistan that in the presence of
billion dollars domestic resources Pakistan is failed to mobilize economy
on the route of progress. The poor taxation system and the corrupt tax
administration have led to a narrow tax base, tight regulations on tax
heavens and lack of training of revenue employees. The central bank of
Pakistan has already been over used by raising the discount rate in double
figures. It is now required to provide ease of monitory policies to provide a
decline in inflation. The decline in inflation can provide a low interest rate
to the private sector helping it rise again. The helping/support policies may
include taxation reforms, reforms in imports and exports sectors and a
review of central bank’s policies (Kundi, 2019b).
Another billion dollars source of revenue is CPEC arising soon on the
horizons of Pakistan’s economy which can play a gigantic role in the
renaissance of economic activities. Pakistan has so far launched 9 SEZs
which have a great opportunity for export promotions and improvement of
export related industries. SEZs couldn’t come to expectations because of
complex rules of starting new business in the country. One window
operation for registration and improved security situation can invite huge
FDI and remittances. The policy of presenting Pakistan’s problem on every

187
international forum need to be avoided and it’s a time for providing ease to
do business environment.
It is safely analyzed that the staunch policy of stabilization has resulted
in negation of the importance of development policies in Pakistan that has
produced negative outputs and damaged employment era. This time again
Pakistan must remain ready to face the undesirable yet expected
consequences of stabilization therapies of low inflation with low growth,
adverse impacts on the programs of poverty alleviation, eradication of
unemployment and provision of economic security to the business
community. The economy needs space for putting its anchors with
prudential policies and structural reforms. Since the government has availed
this 22nd stabilization assistance, hence, it is going to prolong the agony of
economy for another 39 months.
Impact of IMF Bailout Program on Pakistan Economy an Oversight
Impact on Economy
After moderate economic growth, impressive price stability, low foreign
debts, moderate rate of inflation and unemployment from 2003 to 2007
macroeconomic instability appeared again. That is why three times 2008,
2013 and 2019 Pakistan sought financial help from IMF to overcome poor
economic conditions. The objectives of bailout agreements were to improve
macroeconomic imbalances, reduction in inflation and increase in country’s
foreign reserves. Unfortunately, both (2008 and 2013) bailout programs
couldn’t significantly impact Pakistan’s economy. The average economic
growth rate remained 3.8 percent per annum and fiscal deficit 6.25% of
GDP during both IMF programs. Ignoring history the newly elected
government from day one exhibited inclination in approaching IMF for
another bailout program. As a result, country’s economic situation kept on
deteriorating widening the fiscal deficit instead of improvement.
Macroeconomic consequences of fiscal deficit are quite challenging like
accumulation of public debt, rise in interest rate, decline in foreign and local
investment, slower economic growth, rising figures of unemployment and
poverty, worsened physical and human capital hence, fiscal deficit is known
as root cause of all economic ailments.
Impact on Fiscal Policies & Monetary Policies
The 13th IMF bailout program steps in with bundle of stabilization
policies based on targeting the current financial challenges faced by the
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Govt. “The Program aims to tackle longstanding policy on structural

weaknesses, restoration of macroeconomic stability, catalyzing significant
international support and promotion of strong and sustainable growth in
Pakistan.” (Lipton, 2019b). IMF loans influence macroeconomic policies
from multi-faceted channels. The instruments of stabilization policies
include free floating exchange rate and inflexible fiscal and monetary
policies.
Impact on Fiscal Policies
Prior to advancing towards IMF for financial treatment for the ailing
economy, authorities from Economic and financial affairs of Pakistan
started implementing pre IMF conditions to create an appropriate
environment for better negotiations with IMFs representatives but these
tailor made measures couldn’t alter the despotic conditions of IMF. IMF put
certain austere conditions to tighten the fiscal policy and bridle
macroeconomic imbalances. To abide by the agreed upon fiscal policies
government has to increase taxes for earning more revenue, make
reductions in tax exemptions and subsidies, implementation of single value-
added tax (VAT) 1, reduce fiscal deficit, reduce expenditures and freeze
non-development expenditures. The amendments in tax structure by
minimizing tax expenditure, elimination of tax exemptions and rise in tax
revenue slowed down the pace of economic growth to 3.29% (projected
2.4% in 2020-21), increase in government expenditure and increase fiscal
deficit to 8.9% of GDP in the fiscal year 2019.
As a result, before the end of FY 2018-19, total investment declined and
unemployment rate increased to 6.10% along with a drastic decline in
growth rate of different sectors as mentioned in table below.
1
Value Added Tax (VAT) is a fee that is assessed against business by government at
various points in the production of goods and services-usually at the time a particular
product or service is resold or value is added to it. For tax purposes value is added
whenever the value of a product or service increases as a result of application of factors
of production.
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Table 8
Growth of Different Sectors
Impact on Monetary Policy

Central bank can change money supply policies to keep the currency
rate under control as per the conditions laid down by the lending agencies.
Government also uses different monetary policies for price stabilization and
general trust on domestic currency by targeting inflation or interest rate.
Mainly the holy grail of monetary policy is to increase GDP, keep inflation
and unemployment rate low and stabilize exchange rate in terms of other
currencies (Bhatti, 2019). IMF foists the conditions of austere monetary
policy which gives flexible/market determined exchange rate and increase
in discount rate to reduce inflation. In response to IMF’s conditions State
Bank of Pakistan increased discount rate in third quarter by 100bps points
to 13.75%. The increase in discount rate increased the cost of borrowing
casting an adverse impact on private investment, rise in debt servicing or
interest payment, increase in current expenditure, fiscal deficit and
resultantly creating need for more borrowing.
Due to flexible exchange rate Pakistan currency devalued casting
negative effects on current account because of increase in exchange rate. By
2019 exchange rate of Pakistan in terms of dollar increased to 157.94 rupees
in third quarter. Basically, Pakistan economy is based on importing goods
such as; petroleum products, industrial raw materials and capital goods for
domestic consumption. Due to increase in exchange rate prices of imported
goods raised inflation. As mentioned in Table 2 inflation rates rose up to
10.3% in 2019. Furthermore, devaluation of currency gave rise to increase
in debt burden and debt servicing. Both domestic and external debt
increased from 73.9% of GDP in 2018 to 89.3% of GDP in 2019. In the last
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decade the public debt reached the average rate of 15.6% per annum and
58.4% to 73.9% of GDP. It is important to note that Pakistan’s fiscal
situation remained precarious and public debt as percentage of GDP surged,
during the IMF program which speaks volume about efficacy of the IMF
program in restoring fiscal balance (Khan, 2019).
Table 9
Impact of Discount Rates on Public Depth
Impact on Balance of Payments

Balance of payment shows the transactions of one country with the rest
of the world during a year. Mainly it includes three accounts: a) current
account b) financial account c) capital account. The major cause of
Pakistan’s economic condition is due to the distortion in BOP. In the last 70
years history Pakistan’s overall BOP has remained in deficit for most of the
times except 1948, 1951 and 1972. Due to deficit both domestic and
external debts kept on inflating. Huge current account deficit $-19.9 billion
was a main challenge for newly elected government in 2018. The
government adopted bold steps like restriction on imports and signing
bailout program with IMF. These measures improved the current account
balance and decreased current account deficit to $-6.7 billion in 2018-19
and projected to decrease the deficit to $-5.5 billion in 2020.

191
Figure 1
Current Account Deficit of Pakistan
0
Current Account
Sum of 2017-18
deficit $ Billion
-10
Sum of 2018-19
-20
Sum of 2019-20
-30
Year
Devolution of currency is better for a country’s BOP if” Marshal-

Learner condition” holds. But in case of developing countries like Pakistan
it can’t be applied. Thus, currency devaluation has not been proved
beneficial. Currency devaluation increased the prices of imported goods
leading to inflation. It also deteriorated the terms of trade as increase in
prices of imports and reduction in prices of exports. A slight decrease in
imports noted in 2019-20 from 54,277 million dollar to 51,725 million
dollar. On the other hand, exports tremendously decreased primarily
affected by tax amendments, high domestic cost of production, decrease in
production quantity of goods to be exported, in competitive quality of
exports and novelty in export items. Thus, successive devaluation in
Pakistan has failed to correct the deficit of BOP.
Table 10
Summary of Balance of Payment of Pakistan

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The capital account of BOP consists of all international transfers.

Pakistan capital account shows positive trend in 2019-20. Financial account
also shows positive trend from USD -10,708 million from last year to USD-
8,744 million in 2019-20 due to financial support provided by friend
countries and IMF. But this financial support offsets the FDI and foreign
portfolio investment in Pakistan as compared to previous year. FDI declined
by 51.7% in 2019 from USD 2.84 billion to USD1.36 billion (Finance
Division, n.d.). The foreign reserves started to recover due to bilateral and
IMF funds inflow.
Impact on Govt. and Private Investments
Investment means increase in the physical stock of a country over a
period of time. In wider terms, investment is a process of purchase of goods
and services that are not consumed in current time period but to be
consumed in future for creation of more wealth (Makuyana & Odhiambo,
2014). Here Investment divided into public investment and private
investment. Public investment can be in the form of tangible (investment on
infrastructure) and intangible investment (investment on education, skills
and knowledge. In macroeconomic sense, private investment means the
purchase of capital assets that can produce income in future.
IMF insisted that the Pakistan authorities should implement tight fiscal
policy to decrease expenditures so the government has to reduce
development expenditures which leads to reduction in both public and
private investment. As a result of stabilization measures economic growth
declined by 2.2% in 2019 from 5.5% to 3.3% and projected to remain at
2.4% in 2020. It is further declined in private investment by 8.9% as
compared to 9.8% in FY2018. As a result, employment rate declined and
1million people lost their jobs in the Pakistan. Industrial sector is the most
affected hence auto industry is also closing down and its production has
reduced to 50 percent (Ahmed, 2019).
Private investment mainly influenced by the government policies like
change in bank interest rate. These polices have bidirectional relationship
between private investment and GDP growth rate (Syed & Majeed, 2019).
Tough monetary policy has negative impact on private investment as SBP
increased discount rate 475bps points in first three quarter of FY2019.

193
Growth and Unemployment

During the last decade (2008-2018) Pakistan’s economic growth has
slowed to an average of 3.2% per annum. During Financial Year (2018-19)
it reached to 3.3%. Reasons for such dismal growth are adoption of policy
of suppression of demand (demand destruction/austerity program) as
dictated by IMF.
According to the Managing Director of the IMF, Ms. Christine Lagarde,
“the longer demand weakness lasts, the more it threatens to harm long-term
growth as firms reduce production capacity and unemployed workers are
leaving the labor force and critical skills are eroding” (Lagarde, 2016).
A prolonged period of austerity and anti-growth policies has negatively
impacted Pakistan’s growth prospects both in short and long term
perspective. High power tariff has not only affected production capacities
of industrial concerns but also caused increase in the prices of commodities
deteriorating business activities. Tax policies to collect more and more tax
from the same taxpayers without broadening the tax base and putting in
efforts in devising research based tax policies to collect more revenue to
achieve IMF targets has adversely affected production activity and situation
is anticipated to get worse in the second quarter of this financial year and
for the rest of the two quarters while targets in the first quarter have already
collapsed. High power Tariff and absence of skilled force has compromised
the manufacturing sector’s competitiveness in international market
decreasing the quality and quantity of exports. Absence of an efficient and
well trained economic team is further causing troubles for maintenance of
economic stability in the presence of IMF policies. This program is being
anticipated by the economists to cause more damage to the country than its
short time benefit of supporting BOP. There is a dire need to implement
policies to suffice conditions of IMF program in a subtle mode not
damaging the long term structure of economy.
Conclusion
The detailed anatomy of bailout program clarified that the anticipated
impact is only to the extent of interim relief for the drowning economy, a
supplement to weak fiscal and monetary system to camouflage the years old
stubborn, ego centric and discretionary formatted policies in order to
provide a designed outcome to IMF Authorities as per commitments. It is
not a set of futuristically approached final solutions. It is not a cure; it’s just
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a dressing arrangement to address the immediate threats of financial

recession in Pakistan. IMF bailouts are never holistically aimed at
restructuring, re strategizing, re-budgeting or devising to explore the
available resources in a broader perspective.
Hence, it is safely concluded that the impacts of the bailout on the
economy are not only anticipated to be anti-poor but the failure of FBR to
achieve budgetary targets in the first quarter and by now (after passing half
of the second quarter of the current fiscal year) proved its inefficacy to
combat the present economic, socio-financial challenges. The figure of
rising inflations, unemployment, power tariffs and downsizing of public and
private sectors bespeaks volumes about the so called magical monetary
treatment of the program. However, at the same time decrease/control on
imports stabilization of BOP, USD7.5 Billion, decrease in fiscal deficit,
decisive amendments in tax laws eliminating several exemptions/SROs are
flashing healthy financial signs. It could safely be said that the objective of
bailout is not to stabilize the economy but to provide interim support being
misinterpreted as a tool of prosperity of common man while it is to impact
adversely in the medium and long term scenario so simultaneous national
tax/monetary policies need to be devised for. It is further concluded that
neither the previous IMF bailout programs improved the economic
condition of Pakistan nor the current one shall. It is necessary for Pakistan
to depend on its own precious resources to live independently gradually
shedding off its debts and loans placing a deadlock over bailout packages.
Recommendations
• The above discussion showed that IMF stabilization policies had
adverse effects on fragile economy of Pakistan. Yet, it is empirical to
find for enduring solutions for long term economic growth and avoid
seeking financial assistance on harsh conditions. Pakistan is a country
full of resources which are partially explored and utilized. Here are a
few recommendations to strengthen the economy of Pakistan on long
term basis.
• The most concrete solution is the introduction of well-crafted equitable
tax policies by introducing a progressive tax culture. Out of 230 million
people only 1% is taxpayers (not actually paying taxes but NTN
holders). A broader tax base with no exemptions and reductions shall
add volumes to the revenues leading towards self-dependent nation.

195
• Documentation of economy and integration of all the data available with

different departments like NADRA, immigration, Banks, and other
allied departments to prepare a tailor made database for meaningful
audit of taxpayers and booking all those on tax net who are spending
more than declared sources.
• An ease to do business environment with one window operations along
with incentives for new business entities be created for a flourishing
industrial and business sector be created to minimize imports and boost
exports. A technologically strong industrial development shall lower
burden of imports on current account as the devalued currency increases
the prices of imports and increases current account deficit.
• Revival of economic activity through agriculture development through
provision of subsidies to the farmers by lowering power tariffs and
issuing interest free loans is another revenue avenue.
• Investment in Livestock and Dairy Sector shall make not suffice the
local needs but introduction of technological revolution shall put a
barrier on the import of certain unnecessary food items.
• Tourism development is the future of Pakistan. The contribution of
tourism to Pakistan’s GDP was $7.6 billion USD in the year 2016 i.e.
2.7% of total GDP and Govt. of Pakistan anticipates that by 2025,
tourism sector shall contribute $9.5 billion (Rs1 trillion) to the
economy. Pakistan is full of various types of tourism attractions like
religious, adventurous, and scenic. A serious investment in this industry
shall lead to open ways not only for FDI but rise in employment as well.
• An improved situation of security in Pakistan shall increase FDI and
reserves of State Bank of Pakistan.
• Promotion of SEZs with provision of low tariff power, tax reliefs and
subsidies on immediate basis shall help promote industrialization and
enhance exports. In this regard setting up of technological institutes with
streamlined curriculums shall help making up a technically skilled force
for an industrially strong Pakistan to compete in the international
markets. A special focus team to study and research for improved
quality of exports is also the need of the hour to minimize the
dependency on imports.
• Foreign remittances can hike the foreign exchange reserves if sent
through banking channels. Improved banking system to encourage
overseas Pakistanis to remit foreign exchange shall help increase
foreign exchange reserves.
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Sarfraz
• Privatization of loss making state owned enterprises like PIA, Steel

Mills, PTCL be done.
• The government should float sovereign bonds in foreign debt capital
market.
• Imports of all unnecessary luxury items be aggressively banned for
atleast a period of 3 years.
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Impact of Pak-IMF Bailout Arrangement On Economic Growth

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Impact of Pak-IMF Bailout Arrangement On Economic Growth

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Journal of Public Policy Practitioners (JPPP)

Volume 1 Issue 1, Spring 2022

Title: Impact Of Pak-IMF Bailout Arrangement on Economic Growth

Affiliation (s): Inland Revenue Services

Citation: Sarfraz, Z. (2022). Impact of Pak-IM F bailout arrangement on economic growth.

monetary policies, overvalued exchange rates, expedited consumptions and

School of Governance and Society

developments it can rejuvenate economy. He emphasized introduction of

concluded that poor economic policies, political instability and

Journal of Public Policy Practitioners

require reference to the a number sources to highlight a pattern while

School of Governance and Society

IMF and its Functions

Journal of Public Policy Practitioners

policies of member nations. All these exercises contain systematic

Structural Economic Challenges of Pakistan

sector in Pakistan. To maximize exports, Pakistan needs to venture into high

manage Current Account Deficit but this sector is ignored. Slower

Journal of Public Policy Practitioners

IMF stabilization policies disturbed economic growth, inflation and

School of Governance and Society

During IMF financial support Argentina overcame macroeconomic

School of Governance and Society

During the last 10 years after implementing stabilization policies

Journal of Public Policy Practitioners

School of Governance and Society

Journal of Public Policy Practitioners

available in the attic of unusable resources. These facts are well-

provided loans of $200 billion to Ukraine, Argentina, Egypt etc. Pakistan is

Journal of Public Policy Practitioners

• IMF also emphasizes increase in tax base. Pakistan government should

Journal of Public Policy Practitioners

allocation be made for building of human capital for higher education,

School of Governance and Society

Govt. “The Program aims to tackle longstanding policy on structural

Impact on Monetary Policy

Impact on Balance of Payments

School of Governance and Society

Devolution of currency is better for a country’s BOP if” Marshal-

Journal of Public Policy Practitioners

The capital account of BOP consists of all international transfers.

School of Governance and Society

Growth and Unemployment

a dressing arrangement to address the immediate threats of financial

School of Governance and Society

• Documentation of economy and integration of all the data available with

• Privatization of loss making state owned enterprises like PIA, Steel

School of Governance and Society

Journal of Public Policy Practitioners

Macro Economy Meter. (n.d.). External debt (Percentage of GDP) –

School of Governance and Society

Talal, S. (2018, November 23). Here’s the breakdown of Pakistan’s history

Journal of Public Policy Practitioners

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